TitleNews Online Archive

TitleNews Online Archive

Fitch Affirms LandAmerica's insurer financial strength Ratings

January 23, 2003

Changes Outlook to Negative

CHICAGO--(BUSINESS WIRE)----Fitch Ratings has affirmed the 'A' insurer financial strength (IFS) ratings of the title insurance underwriting companies of LandAmerica Financial Group, Inc. (LFG). The Rating Outlook for all ratings has been changed to Negative from Stable.

The affirmations are supported by LFG's strong brand name, a high-quality and liquid investment portfolio, conservative operating leverage, sufficient statutory reserve position and moderate financial leverage. LFG's debt-to-total capital ratio is expected to be managed long term to approximately 25%, and was 19.0% at Sept. 30, 2002.

The Negative Outlook represents Fitch's opinion that LFG has not attained optimal consolidated operating performance during one of the strongest real estate markets in recent history. This view is supported by the recent exits of ancillary real estate operations that had not generated favorable operating performance. As a result, LFG is more heavily reliant on its title insurance operations to generate returns than several peer companies that also benefit from profitable ancillary service operations. During the first nine months of 2002, LFG's GAAP revenue growth and pretax margins at 18.0% and 7.1% respectively were below national peer averages of 25.8% and 9.8%, respectively. Further, in 2001, LFG's market share (based on revenue) declined to 19.8% at year-end 2001 from 20.9% at year-end 2000.

In 2001 and 2002, low interest rates produced a boom in the real estate market, which significantly improved the title insurance industry's operating results. Fitch recognizes that LFG benefited from the favorable real estate environment as operating results improved in 2001 and through the first nine months of 2002. Among the national title insurance organizations, LFG's underwriting expense ratio is the second best of the five largest companies.

Fitch recognizes that LFG's recent operating results and market share statistics may have been negatively impacted by the geographic dispersion of its market share. Growth rates in Texas, where LFG's holds a large market share, were lower than growth rates in California, where other national title insurers hold a stronger market share.

LFG is one of the three largest providers of title insurance in the United States, which offers both residential and commercial title insurance. LFG is a publicly traded holding company with GAAP assets and shareholder's equity of $1.8 billion and $799 million, respectively at Sept. 30, 2002.

Entity/Issue/Type

Action

Rating/Outlook

Commonwealth Land Title Insurance Company --Insurer financial strength

Affirmed

'A'/Negative.

Commonwealth Land Title Insurance Company of New Jersey --Insurer financial strength